‘Section 38 on Deemed Assessed Value could infringe on tax payers’ rights’
by Sanath Nanayakkare
Speaking at a Webinar held on the 2nd June 2021.on “Recent Amendments to the Inland Revenue Act” Shamila Jayasekara Partner – Head of Tax & Regulatory said that in principle, retrospective tax law was bad as it could have negative consequences on the concluded transactions of businesses.
Sharing her concerns and views on the topic she said,” A lot of changes made to the tax code are incentives provided through the form of tax exemptions, the concessionary rate being applied to a large number of sectors, the qualifying payments allowed and expanded, the withdrawal of withholding taxes, the expansion of deductible tax expense”.
“Those were the plus factors of the tax proposals to give relief to businesses. Now, they are retrospective. Some of the agriculture tax excemptions come in from April 2019 and the others from January 2020. so we need certain clarifications and guidelines to be issued by The Inland Revenue Department fast, so we can implement them during this month. Then as practitioners, we can amend returns that have already been submitted and filed.”
“Another area I want to bring is another area is; there were certain changes that were done which were not budget proposals and which were not announcements in press statements either with retrospective effect going back to April 2018. Now in principle, I think retrospective tax law is bad, but in circumstances when certain incentives were given and published, then of course you become aware of these changes though the law may not be there. But it should not hit you as a surprise when you read the tax amendments because these have consequences to concluded transactions of businesses. I don’t think it is positive from the tax side where you suddenly find you have concluded a transaction and then you find the tax law has changed with retrospective effect. What has happened has happened but it should not happen. I understand that even in the current amendments there are gaps. If you take concessions given to SMEs, I think there is a bit of doubt as to what an SME is. I understand these changes and I know that the policymaker can change those, but those should be done prospectively. It should not be a retrospective change because tax law is a fiscal law and no one would know the thinking behind policies ,so you go on the wording of the law, therefore, any change should be prospective’
“Further, the introduction to section 38 of a deemed assessed value on the realization of investment assets; you are to consider it on the market or an assessed value or the value given by a valuer.. But if the commissioner is of the view that is not reflective of market value then he can determine an alternate value. I think that gives a lot of room for arbitary valuations and a lot of disputes. With regard to this section, there is no penal code either because the law empowers the determined value to be accepted as the assessed value. That will of course infringe on the tax payers rights,” she said.
Oil cartel leader warns of prolonged high prices
The price of oil will continue to stay elevated as demand for energy increases, says the secretary general of Opec+.
Opec+ is a group of 23 oil-exporting countries which decides how much crude oil to sell on the world market. “We see demand growing about 2.4 million barrels a day,” Haitham Al Ghais told the BBC.
Saudi Arabia said it would be cutting its production of crude oil by a million barrels a day to boost prices.
The International Energy Agency (IEA) said the decision by Saudi Arabia and Russia – two major oil producers and members of Opec+ – to cut production could cause a “significant supply shortfall” by the end of this year.
Al Ghais said: “This is a voluntary decision taken by two sovereign nations, Saudi Arabia and Russia. This decision can be described as precautionary or pre-emptive because of uncertainties”.
Following Russia’s invasion of Ukraine in February 2022, oil prices soared, hitting more than $120 a barrel in June last year. They fell back to a little above $70 a barrel in May this year, but have steadily risen since then as producers have tried to restrict output to support the market.
Brent crude, a benchmark for prices, breached $95 a barrel on Tuesday amid predictions of shorter supplies, with fears the price may breach $100 per barrel. The rise prompted a warning to drivers that fuel prices could rise in the coming 10 months, and stoked fears that inflation in key economies could be prolonged.
But Mr Al Ghais said Opec was more concerned about “under investment” in the oil sector. “Some have called for stopping investments in oil. We believe this is equally dangerous. It will lead to volatility in the future, possible supply shortages. And therefore we at Opec have always advocated for the importance of continuing to invest in the oil industry as we also invest in decarbonising the industry and move on to adding other forms of alternative energy such as renewables”.
Asked if he was concerned about rising oil prices affecting inflation around the world if it goes above $100 a barrel, Mr Al Ghais said it was “important not to look at things in a short-sighted manner”. “For next year we see demand continuing to grow north of 2 million barrels a day – of course, all subject to some of the uncertainties in the global market. Nevertheless, we still feel quite optimistic that global oil demand is going to be quite resilient this year”.
Mr Al Ghais said that the oil industry would need close to $14tn in investment to the year 2045. “Energy demand will grow by nearly 25% by the year 2045 compared to what it is today – and all forms of energy will be required”, he said.
His comments come ahead of a meeting of key oil players on Wednesday in Abu Dhabi for the International Petroleum Exhibition and Conference (ADIPEC).
Leading US-based international trade finance services provider to set up in Sri Lanka
By Hiran H.Senewiratne
Leading US-based international trade finance services provider, iBEX Global, will officially set up in Sri Lanka soon.
Chairman and founder of iBEX Global, based in Atlanta, Georgia, Maverick Robinson who is currently in Sri Lanka, at a special event held recently at Galle Face Hotel, said that Sri Lanka is the third country after UAE to launch their operations.
“We have been following developments in Sri Lanka since August 2022 and have appointed Jayamal Hewage as our Managing Director, Robinson said.
Hewage is the Group Managing Director of Jayamal Holdings Group of Companies.
Robinson said that iBEX Global was set up four years ago by him in the US in the thick of the COVID pandemic at a time when companies were shutting down.
Robinson added: “We saw a huge vacuum for logistics and international trade finance services, mainly to import personal protective clothing (PPE), like masks from countries like Malaysia and Indonesia. At that time the supply chains and support services were completely in disarray but we quickly gathered a professional team, created and opened a new supply chain, helping to save and protect the lives of many.
“By doing this we proved that there is opportunity in crises and we see similarities in Sri Lanka and this is why we decided to open here. Our primary focus centers on providing international trade finance services tailored to each customer’s unique needs.
“We see that with better marketing networks, attractive packaging and product financing (of which we are experts) Sri Lanka’s exports could be increased by almost 20% in less than a year.”
Meanwhile, Jayamal Hewage said: “In Sri Lanka we intend to cater to medium, small and macro sized companies and those who come on board with us will be provided technical advice on product development, superior packaging and other technical advice, all free of charge.
“iBEX Global can even offer financing up to USD 10 million for companies to develop their product range.
“They would also be linked with new global markets that were not accessible to them.
“Our services also include Standby Letters of Credit, Bank Guarantees, RWA Documents, Documentary Letters Credit and many other similar services.”
Sri Lanka slips in Economic Freedom
Sri Lanka ranks 116 out of 165 jurisdictions included in the Economic Freedom of the World: 2023 Annual Report, released by Advocata Institute in conjunction with Canada’s Fraser Institute. The current ranking represents a decline in the economic freedom of the country which ranked 104th during 2020.
The report measures the economic freedom of individuals—their ability to make their own economic decisions—by analyzing the policies and institutions of 165 jurisdictions. The policies examined include regulation, freedom to trade internationally, size of government, legal system and property rights, and sound monetary policy. The 2023 report is based on data from 2021, the last year with available comparable statistics across jurisdictions.
Sri Lanka’s decline in score was driven by 4 out of the 5 sub indicators of economic freedom registering declines in their respective individual scores. These indicators are the size of government, access to sound money, freedom to trade internationally, and the regulation of credit, labour, and business. The only indicators that registered an improvement in its score is the indicator of legal system and property rights.
“The report captured a stark warning: Sri Lanka’s economic freedom declined prior to the economic crisis of 2022, a testament to the vulnerability of nations with limited economic freedom in the face of economic turmoil. If the country is to recover, Sri Lanka must prioritize economic growth within the framework of maximising economic freedom for its citizens to trade, work, and transact freely in a stable monetary and fiscal environment” said Dhananath Fernando, Chief Executive Officer at the Advocata Institute.
The number one spot is now occupied by Singapore, followed by Hong Kong, Switzerland, New Zealand, the United States, Ireland, Denmark, Australia, the United Kingdom, and Canada. Other notable countries include Japan (20th), Germany (23th), France (47th) and Russia (104th).
Venezuela once again ranks last. Some countries such as North Korea and Cuba can’t be ranked due to lack of data.
The Fraser Institute produces the annual Economic Freedom of the World report in cooperation with the Economic Freedom Network, a group of independent research and educational institutes in nearly 100 countries and territories. It’s the world’s premier measure of economic freedom.
The report was prepared by Professor James Gwartney of Florida State University and Professors Robert A. Lawson and Ryan Murphy of Southern Methodist University.
According to research in top peer-reviewed academic journals, people living in countries with high levels of economic freedom enjoy greater prosperity, more political and civil liberties, and longer lives.
For example, countries in the top quartile of economic freedom had an average per-capita GDP of US$48,569, compared to US$6,324 for bottom quartile countries. Poverty rates are lower. In the top quartile, less than one per cent of the population experienced extreme poverty (US$1.90 a day) compared to 32 per cent in the lowest quartile. Finally, life expectancy is 81.1 years in the top quartile of countries compared to 65 years in the bottom quartile.
“Where people are free to pursue their own opportunities and make their own choices, they lead more prosperous, happier and healthier lives,” Fred McMahon, Dr. Michael A. Walker Research Chair in Economic Freedom with the Fraser Institute said.
See the full report at www.fraserinstitute.org/economic-freedom.
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